The Paris Agreement’s goal of limiting the average annual temperature increase above pre-industrial levels to 1.5˚C demands that fossil fuel production and consumption declines rapidly and immediately. Both the IPCC and the IEA make it clear the world cannot afford to dig up new fossil fuels, nor build new fossil fuel infrastructure.
In this report we have analysed the outlook for LNG carrier and oil tanker shipbuilding under a suite of future energy consumption and production scenarios, covering a range of global emissions levels and associated long term temperature rises.
Given the expected future decline in fossil fuel use, as the world moves to limit warming to 1.5˚C, it is inevitable that oil tanker and gas carrier shipbuilding will also experience a decline. Moreover, as we show here, a decline in this shipbuilding sector would occur even under policies and actions that limit to warming to 1.7˚C or 2.5˚C.
These ship types accounted for 27% and 10% of new ship builds globally over the period 2016 to 2020. Any decline in the market for these ships will have a significant effect on the sector as a whole.
The objective of this study is to examine the risks faced by the global, and particularly the Korean, shipbuilding industry, in the face of a decarbonising world.
Korea has one of the largest ship building industries in the world, capturing 37% of total global orders in 2022, and holding a dominant position in the industry building both LNG carriers and very large crude oil carriers (VLCC). Korean shipbuilders won 70% of the global orders for large LNG carriers in 2022. In terms of compensated gross tonnage (cgt), LNG carriers accounted for 65% of all the orders won by Korean shipbuilders in 2022.
Korea’s shipbuilding sector is heavily dependent on the manufacturing of oil tankers and LNG carriers, and is therefore likely to face a fundamental crisis. As ships have consistently ranked among the country’s top ten exports in terms of value, a crisis in shipbuilding will have adverse effects on the country’s wider economy.
Globally, LNG carriers have played an increasingly important role in the natural gas export market. The share of natural gas traded via LNG carriers increased from 27% in 2000 to 51% in 2021. LNG trade accounted for 76% of the growth in total natural gas trade over the period. It is therefore likely that any future growth in natural gas trade, and consequently consumption, will depend critically on the building of new LNG carriers. Conversely, a decline in natural gas consumption will likely be particularly detrimental to the LNG carrier shipbuilding industry.